Millionaires are not necessary good models

The Millionaire Next Door, a popular book, argues that saving is the way to become rich. Which is true, but misleading. The less money we spend, the more we save, and the richer we are likely to be. But the goal should be to maximize happiness, not wealth. Money is for spending, and it seems a bit strange to idolize the foolishness of forgetting to do so. This is no argument for profligacy, of course, we must remember both that saving now can let us spend more later, and that we have a high discount rate, hardwired from a time when the future was much less certain than it is now. Just remember that a sample of millionaires will be biased towards those who overcorrect too much.

(and to those who got lucky, but that's a whole 'nother topic)

Share this

The weird John Sabotta guy

The weird John Sabotta guy at no-treason.com usually uses "cattle-archy" as an insult whenever some over-the-top piece of utilitarian-run-amok comes out of you guys. Or when he's jealous of your site ratings, not sure which.

That's the spirit! More

That's the spirit! More cows, less freedom.

Moo.

Moo.

Wouldn't cattle-archy

Wouldn't cattle-archy literally mean "rule by cows"? Come to think of it, I suppose we could do worse.

Death penalty for

Death penalty for white-collar crime?

How stupid is that?

In such a situation the marginal cost to the criminal for running from the law and going on a killing spree to ensure his freedom and continued existence drops to zero.

This was, of course, pointed out by Patri Friedman's father in _Law's Order_.

Bearer, two comments on your

Bearer, two comments on your first post:

I advocate the death penalty for white-collar crime in order to stop it cold...

Are you kidding? Any first-semester psych book will tell you that consistency and not severity of a punishment is indicative of its effectiveness. And although the idea of the death penalty for murderers makes me all warm and fuzzy inside, the studies frustratingly show that it really doesn't deter much at all. (I don't think I really even need to comment on the reasonability of your proposal in general.) So even if your idea were palatable, it still doesn't make sense.

And secondly, what's wrong with dynastic wealth? Now I did have to go look up 'dynastic' before writing this post, but to me it seems admirable to create a supply of wealth sufficient to support your progeny for generations. How on earth can one argue with the desire to make the lives of your children easier?

Matt - yes, I've read and

Matt - yes, I've read and greatly enjoyed Taleb's book.

I'm amenable to discussion

I'm amenable to discussion about the appropriate penalty for fraud & grand theft larceny of the white-collar variety. The idea is to stop the looting of companies by CEOs and upper management. Perhap hanging or the firing squad doesn't appeal to you on the cost/benefit merits or for esthetic reason. Perhaps likewise you would feel that cutting out their lying tongues and gouging out their shifty eyes would be too extreme. We could bring back public humiliation by pilloring or by tar and feathering. What about a year in jail for every thousand dollars they stole? I still would like to see Ken Lay get shot, and I think a lot of little old lady investors who lost their life savings by his malfeasance would like to strangle him with their arthritic bare hands.

Where'd you get the idea

Where'd you get the idea that I don't believe in the effectiveness of deterrents?

There's already significant empirical data (for just one example: what's happened in California as a result of the idiotic 3 Strikes law) showing that increasing punishment levels for crimes has non-trivial unintended consequences, often on innocent 3rd parties.

In other words, if you're gonna die anyway, what's the harm in taking out a few cops in an effort to evade the law? With your stupid idea, the answer is "none", plus significant benefits (you get to stay alive) if your plan succeeds. Maybe "Martha Stewart" wouldn't do it, but I have no doubt "Sal the Stockbroker" (and boileroom telemarketer) wouldn't think twice.

Like you really think Martha

Like you really think Martha Stewart would go on a killing spree? Maybe she wouldn't have committed insider trading, or she would have thrown herself on the mercy of the court, and promised to bake cakes for everybody. So, you don't believe in the effectiveness of deterrents? How stupid is that?

Totally OT, but for

Totally OT, but for completely shallow reasons, you guys desperately need a parody site. Every time I read the word "Catallarchy", I can't help but think "cattle-archy". You know, the blog for libertarian cows? A certain blog has pirate mode: you guys need cow mode. :juggle:

I agree with Mark in that I

I agree with Mark in that I interpret capitalism as just a mechanism of economic freedom and individual choices that enables one to dictate thier own comfort level. Not merely a get-rich-quick scheme.

I also think Bearer's choice of lifestyle is a good one and it's one that I, too, find optimal... Reducing future stress and uncertainty by accumulating enough wealth and having a nice security blanket, but still spending and/or giving away a significant portion by the time you take your celestial dirt nap. I couldn't imagine giving back the great experiences and far-flung vacations I've had in order to get that extra money back and watch it grow. As the saying goes, you can't take it with you when you die. But again, it's still that lifestyle choice. If someone wants to admire his millions on a bank statement, pinch pennies throughout life, and dies with those millions still in the bank, then so be it.

No matter what you diehard

No matter what you diehard capitalists may think, the amounting of dynastic wealth is fundamentally wrong and anti-social...

I shouldn't speak for other diehard capitalists, but this one generally agrees that "the amounting of dynastic wealth" is at least often "wrong and anti-social". I view it the same way as I view drug use, polygamy, and religious fanaticism: "If you decide to live your life this way (and do so without violence or fraud), go ahead. But it's not for me."

The word "Capitalism" conotes individual freedom to me. I realize to many others, it conotes a pig in a top-hat with a cigar standing on bags of money laughing at a skinny family in rags. Throw away the strawman, and we can make more progress in deciding how we want to live our lives.

Life is a short, and the

Life is a short, and the future is uncertain. If you don't believe me now, you will as you experience the dreaded aging process, and as you ride your bike on a busy street and try to avoid getting run over by a careless driver talking on a cellphone.

No matter what you diehard capitalists may think, the amounting of dynastic wealth is fundamentally wrong and anti-social; another word for that is sick. Back to the point of Patri's post about savings: it's sensible to try to accumulate enough wealth to reduce some stress about one's financial future. It is prudent to save for a rainy day. I'm annoyed by cheap people who think that they must amass enough wealth to be able live off the interest of their investments without dipping into their capital. Most of these people foolishly think money is some kind of all-encompassing security blanket. This may lead them to undertake unethical or bad behaviour such as stealing. As a result of the inculcation of miserly attributes, some people under-induldge , and never are really capable of enjoying their money or their lives. Most people anabolically accumulate money from work and investments to reach a peak of asset ownership. Later in life, often by the age of retirement, people can catabolically spend or give away their property and savings until it is mostly used up. That strikes me as being very efficient and socially desirable. Also, I advocate the death penalty for white-collar crime in order to stop it cold. Deterrents work best on those who have some education and native intelligence, and can consider the consequences of their actions.

Mr. Taleb has a website as

Mr. Taleb has a website as well (www.fooledbyrandomness) as well as an interview on Edge.org where he specifically comments on "The Millionaire Next Door". For those who haven't read the book or seen the interview, his primary complaint is survivorship bias. He has a rather more elegant description of it, that of the drowned worshippers. You only hear about the worshippers that survive the storm hitting the boat, not those that drown.

As far as the book itself, I recommend it - it can be a bit overbearing at times, but I think the sorts of issues he brings up are fascinating.

The luck part is more

The luck part is more interesting, I think. Have you read Nassim Taleb's book? (I haven't.)

Cows are sacred, yo.

Cows are sacred, yo.

I wish to register a

I wish to register a complaint. Capitalism doesn't give me enough to spend my money on. I already have a house, car and two cats. I have enough Pinot Noir to drink. My books come largely from libraries and CDs of Good Music are absurdly cheap. Apart from saving against medical expenses, what is there to spend it on?